State Updates
California Rolls Back Landmark Environmental Law ‘CEQA’
7/1/25
As the final piece of legislation needed to pass the 25-26 Fiscal Year Budget, Newsom signed a housing bill on Monday that weakens the California Environmental Quality Act. The landmark environmental review law, signed in 1970 by then-Governor Ronald Reagan, has been criticized as becoming a roadblock for meaningful housing development.
When Governor Newsom and the Legislature agreed to a budget deal last week, it came with a major caveat: the legislature must pass specified trailer bills that would massively roll back the California Environmental Quality Act (CEQA). The two trailer bills: AB 130 and SB 131 are the most significant changes to the law’s over 50-year history. The two bills had bipartisan support and fulfilled one of the Governor’s promises of overhauling CEQA to reduce development times.
Changes to CEQA
The major changes to CEQA hope to build more, build faster, and increase affordability for the state’s nearly 40 million residents. On housing, high-density projects will be exempted from CEQA reviews so long as they are not on environmentally sensitive or hazardous sites.
Additionally, the changes will streamline CEQA reviews for dozens of project types, including:
• Infill housing
• High-speed rail facilities
•Utilities
• Broadband
• Community-serving facilities
• Wildfire prevention
• Farmworker Housing
The trailer bill maintains protections for natural and sensitive lands, while also exempting local governments’ rezoning plans from CEQA as part of their implementation of approved housing elements to accelerate site readiness. Impact on Housing While it remains to be seen how much more housing can be built as a result of the massive changes to CEQA, it’s clear this will take away a massive roadblock that has hamstrung housing development in California. The state’s housing shortage cannot be attributed to any one issue, but getting rid of unnecessary red tape to solve California’s most prevalent issue is a major change. By streamlining the development of most urban housing projects, California and Orange County should be able to build more, and faster, without the threat of lawsuits and delays. Other Items Passed While the overhaul of CEQA will make headlines due to its widespread implications, the trailer bills’ other aspects will make a major impact as well. Other items that were passed on Monday include:
• Expanding the Permit Streamlining Act by limiting certain Coastal Commission housing appeals and speeding up Coastal permitting
• Freezes new residential building standards through 2031 with exceptions for emergency, fire, and conservation related updates
• Creates a new funding source for affordable housing through a CEQA Vehicle Miles Traveled Mitigation Bank that allows developers to complete their VMT obligations through contributing to a fund
• Requires annual inspections of cities and counties to strengthen oversight of local homeless shelters
• Expands the Renters Tax Credit by more than doubling it to up to $500 for qualified
Overall, the trailer bills that were passed in tandem with the 2025-26 California budget will make a positive impact on housing development timelines, housing affordability, affordable housing funding, and tenant relief.
• Infill housing
• High-speed rail facilities
•Utilities
• Broadband
• Community-serving facilities
• Wildfire prevention
• Farmworker Housing
The trailer bill maintains protections for natural and sensitive lands, while also exempting local governments’ rezoning plans from CEQA as part of their implementation of approved housing elements to accelerate site readiness. Impact on Housing While it remains to be seen how much more housing can be built as a result of the massive changes to CEQA, it’s clear this will take away a massive roadblock that has hamstrung housing development in California. The state’s housing shortage cannot be attributed to any one issue, but getting rid of unnecessary red tape to solve California’s most prevalent issue is a major change. By streamlining the development of most urban housing projects, California and Orange County should be able to build more, and faster, without the threat of lawsuits and delays. Other Items Passed While the overhaul of CEQA will make headlines due to its widespread implications, the trailer bills’ other aspects will make a major impact as well. Other items that were passed on Monday include:
• Expanding the Permit Streamlining Act by limiting certain Coastal Commission housing appeals and speeding up Coastal permitting
• Freezes new residential building standards through 2031 with exceptions for emergency, fire, and conservation related updates
• Creates a new funding source for affordable housing through a CEQA Vehicle Miles Traveled Mitigation Bank that allows developers to complete their VMT obligations through contributing to a fund
• Requires annual inspections of cities and counties to strengthen oversight of local homeless shelters
• Expands the Renters Tax Credit by more than doubling it to up to $500 for qualified
Overall, the trailer bills that were passed in tandem with the 2025-26 California budget will make a positive impact on housing development timelines, housing affordability, affordable housing funding, and tenant relief.
Newsom and Legislature Tentatively Agree to $321 Billion Budget Deal
6/25/25
Governor Newsom and Democrats have agreed on a $321 billion budget that eases up on previously proposed cuts. However, Newsom has stated the deal is contingent on a CEQA reform bill being included in the proposal by Monday.
California elected officials have reached an agreement on the 2025-2026 fiscal year budget just days before the July 1st deadline. The tentative budget proposal lessens the governor’s proposed cuts, and instead relies on borrowing money and using the state’s rainy day fund to pay for the $12 billion expected budget deficit.
Despite an agreement from the Governor and the Legislature on the upcoming budget, it is contingent on the latter including CEQA reform in the final proposal. The CEQA reform in question is likely two bills currently going through both the Senate and Assembly that would provide CEQA exemptions for urban housing developments and other infill infrastructure projects.
While the proposal avoids the large budget cuts that were previously proposed by Governor Newsom in his January and May budget proposals, the bill still does reduce funding to a number of areas. Those agreed upon cuts include reducing the expansion of state-sponsored healthcare to undocumented immigrants and reinstating the asset limit tests for Medi-Cal enrollees.
On Housing
Following months without funding for housing in the Governor's budget proposals, the agreed upon proposal includes the following allocations:
• $500 million for the state Low-Income Housing Tax Credit
• $300 million for the California Dream for All homeownership program
• $120 million for the Multifamily Housing Program
• $100 million for the Encampment Resolution Fund
Additionally, after months of not including funding for the Homeless Housing, Assistance, and Prevention (HHAP) program, the proposal includes $500 million for the program in the upcoming year. The bill also adopts reforms for the Renter’s Tax Credit, which will be subject to future appropriation. The trailer bills regarding housing for the budget include provisions from:
• SB 607 which modifies CEQA procedures for infill instructure developments
• AB 609 which exempts much of CEQA for urban housing developments
• AB 1244 which creates a vehicle miles traveled mitigation bank to fund affordable housing projects throughout the state
• AB 306 to halt residential building codes for a specified time
• SB 681 to limit Coastal Commission appeals on housin
AB 1244 is supported by The Kennedy Commission. However, there are still no updates on whether California leaders plan to keep the Affordable Housing Sustainable Communities program funded through the Greenhouse Gas Reduction Fund. With the Governor recently announcing his intent to extend the fund until 2045 and retain the significant allocation towards high-speed rail, it would not be surprising if AB 1244 VMT fund would be used as a replacement for AHSC. Regardless, we will continue to advocate for the Affordable Housing Sustainable Communities program to be extended with a 20% allocation. The included money for the above housing programs is a huge step forward from where we began in January. With over $1 billion dollars allocated to vital programs that facilitate the construction of affordable housing, provide pathways to home ownership, and work to alleviate homelessness, our advocacy over the past few months has worked. While it might not be the nearly $3 billion we have advocated for, it is a far cry from the funding allocations that we began with. Although the agreement is only tentative and is reliant on the housing trailer bills, the Governor and Legislature appear to be ready to enact next year’s budget just before the new fiscal year begins on July 1st.
• $500 million for the state Low-Income Housing Tax Credit
• $300 million for the California Dream for All homeownership program
• $120 million for the Multifamily Housing Program
• $100 million for the Encampment Resolution Fund
Additionally, after months of not including funding for the Homeless Housing, Assistance, and Prevention (HHAP) program, the proposal includes $500 million for the program in the upcoming year. The bill also adopts reforms for the Renter’s Tax Credit, which will be subject to future appropriation. The trailer bills regarding housing for the budget include provisions from:
• SB 607 which modifies CEQA procedures for infill instructure developments
• AB 609 which exempts much of CEQA for urban housing developments
• AB 1244 which creates a vehicle miles traveled mitigation bank to fund affordable housing projects throughout the state
• AB 306 to halt residential building codes for a specified time
• SB 681 to limit Coastal Commission appeals on housin
AB 1244 is supported by The Kennedy Commission. However, there are still no updates on whether California leaders plan to keep the Affordable Housing Sustainable Communities program funded through the Greenhouse Gas Reduction Fund. With the Governor recently announcing his intent to extend the fund until 2045 and retain the significant allocation towards high-speed rail, it would not be surprising if AB 1244 VMT fund would be used as a replacement for AHSC. Regardless, we will continue to advocate for the Affordable Housing Sustainable Communities program to be extended with a 20% allocation. The included money for the above housing programs is a huge step forward from where we began in January. With over $1 billion dollars allocated to vital programs that facilitate the construction of affordable housing, provide pathways to home ownership, and work to alleviate homelessness, our advocacy over the past few months has worked. While it might not be the nearly $3 billion we have advocated for, it is a far cry from the funding allocations that we began with. Although the agreement is only tentative and is reliant on the housing trailer bills, the Governor and Legislature appear to be ready to enact next year’s budget just before the new fiscal year begins on July 1st.
California Legislature Approves Budget Proposal
6/18/25
Following two budget proposals from Governor Newsom that featured no new money for state housing programs, the legislature proposed their version of the budget that is highlighted by new investments in housing tax credits, multifamily housing, and home ownership.
On June 13th, the California State Legislature approved a budget proposal that would restore many of the cuts that Governor Newsom proposed in his May Revise. In the wake of a $12 billion deficit, the governor opted to cut spending in his most recent proposal. The Legislature opted to borrow money to create a balanced budget.
The $325 billion budget includes new money for housing programs, which was completely left off of the Governor’s May Revision. It allocates nearly $1 billion total dollars towards the following programs:
• $500 billion for the State Low-Income Housing Tax Credit
• $120 million for the Multifamily Housing Program
• $300 million for the California Dream for All home-ownership program
The proposal also includes language to later reform the Renter’s Tax Credit, provide $500 million to Homeless Housing, Assistance, and Prevention in 2026-2027, and pass two housing streamlining bills as trailer legislation. Outside of housing, the Legislature approved restoring funding towards California’s public colleges and universities, continuing to give raises to state employees, and lower premiums for some Medi-Cal beneficiaries. While we are excited to see that the Legislature commits over $900 million to affordable housing and homeownership, it is still far lower than our $2.9 billion budget ask we have requested. In the over $300 billion budget, our recommendation would amount to less than 1% of the total budget. Our proposal allocates the following:
• $1 billion for the state Low-Income Housing Tax Credit
• $1 billion for the Homeless Housing, Assistance, and Prevention program (HHAP)
• $400 million for the Multifamily Housing Program
• $400 million for CalHome
• $100 million for the Joe Serna, Jr. Farmworker Housing Grant Program
Overall, Governor Newsom and the Legislature are very far apart on how they seek to create a balanced budget for the upcoming fiscal year. However, time for negotiation between the two parties is dwindling as the new fiscal year begins July 1st.
• $500 billion for the State Low-Income Housing Tax Credit
• $120 million for the Multifamily Housing Program
• $300 million for the California Dream for All home-ownership program
The proposal also includes language to later reform the Renter’s Tax Credit, provide $500 million to Homeless Housing, Assistance, and Prevention in 2026-2027, and pass two housing streamlining bills as trailer legislation. Outside of housing, the Legislature approved restoring funding towards California’s public colleges and universities, continuing to give raises to state employees, and lower premiums for some Medi-Cal beneficiaries. While we are excited to see that the Legislature commits over $900 million to affordable housing and homeownership, it is still far lower than our $2.9 billion budget ask we have requested. In the over $300 billion budget, our recommendation would amount to less than 1% of the total budget. Our proposal allocates the following:
• $1 billion for the state Low-Income Housing Tax Credit
• $1 billion for the Homeless Housing, Assistance, and Prevention program (HHAP)
• $400 million for the Multifamily Housing Program
• $400 million for CalHome
• $100 million for the Joe Serna, Jr. Farmworker Housing Grant Program
Overall, Governor Newsom and the Legislature are very far apart on how they seek to create a balanced budget for the upcoming fiscal year. However, time for negotiation between the two parties is dwindling as the new fiscal year begins July 1st.